A Data-driven Approach for Planning Stock Keeping Unit (SKU) in a Steel Supply Chain

Abstract

In response to the growing complexities in supply chain management, there is an imperative need for a data-driven methodology aimed at optimizing inventory allocation strategies. The purpose of this research is to enhance the efficiency of allocation and operational scheduling, particularly concerning the stock keeping units (SKUs). To achieve this, one year's operational data from a specific organization's SKUs is taken and machine learning tools are employed on the data collected. These tools are instrumental in identifying clusters of SKUs that exhibit similar behaviour. Consequently, this research offers recommendations for rational inventory allocation strategies that are finely attuned to the unique characteristics of each SKU cluster. Results obtained reveals substantial disparities between the recommended strategies for the organization's SKUs and those typically found in the literature such as same strategy cannot be used for all different types for products. This underscores the critical importance of adopting a tailored approach to supply chain management. Furthermore, the research demonstrates the remarkable efficiency of unsupervised machine learning algorithms in determining the optimal number of segments within the SKUs. The current research differentiates from others in a way that in most of the research, the holistic data-driven approach is underutilized, right from the selection of the clustering algorithm to the validation of segments.

Keywords

• machine learning
• steel industry
• supply chain segmentation
• inventory optimization
• forecasting